Chapter 2 [Compatibility Mode]

Chapter 2 [Compatibility Mode] - ECON 002 Introduction to...

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1 ECON 002 Introduction to Macroeconomics Chapter 2 No Free Lunch • All decisions have benefits and costs. • Wants are unlimited • Trade offs ECON 002 Introduction to Macroeconomics Opportunity Costs • Opportunity cost of any choice – What we must forego when we make that choice ECON 002 Introduction to Macroeconomics Opportunity Costs • The opportunity cost of a choice includes – Explicit cost – Implicit cost • Arises from the scarcity of time or money • Time is money
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2 ECON 002 Introduction to Macroeconomics Production Possibilities Frontiers • To produce more of one thing, have to give up something else. • Production Possibilities Frontier (PPF) ECON 002 Introduction to Macroeconomics Figure 2 The Production Possibilities Frontier Bushels of Wheat per Year 1,000,000 950 000 B A all resources are used for wheat Moving from point A to point B requires shifting resources out of wheat and into tanks Number of Tanks per Year 1,000 2,000 3,000 4,000 5,000 950,000 850,000 700,000 400,000 C D E F W all resources are used for tanks ECON 002 Introduction to Macroeconomics Number of Lives Saved Per Period A B Number of Consumer Goods Produced Per Period C
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3 ECON 002 Introduction to Macroeconomics Opportunity Cost • According to law of increasing
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Chapter 2 [Compatibility Mode] - ECON 002 Introduction to...

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